The Good Old Days Were Never This Cheap Most Goods Less Expensive Today Than In The 1950s, Study Reports
Remember the good old days when a typical American home sold for $14,500, a haircut went for $1.50 and gasoline was about 30 cents a gallon?
Well, forget all that, because all those things are cheaper now than they were a generation ago during the fabulous ‘50s - and so are most other items that American consumers buy.
The bargains may not be apparent in the face of today’s higher price tags. But Americans also earned far less back then. With the higher wage levels of the 1990s entered into the equation, we are far better able to afford these goods and services today.
A new study by a regional Federal Reserve Bank chronicles the cost of houses and consumer goods based on how many hours a typical American would have to work to pay for each item, and it comes out with a startling conclusion:
The real cost of living in America has declined sharply.
For example, it took the average worker 6.5 hours to earn enough money to pay for each square foot of the $14,500 home that was typical in the 1950s. Last year, the median price of a house was $140,000, but it required just 5.6 hours of work per square foot to finance.
Workers in the 1950s had to spend 63 minutes on the job to be able to pay for that $1.50 haircut, but today’s more expensive version requires only about 46 minutes of work. Buying a gallon of gasoline took 9.4 minutes at work back then. Today it takes only 5.7 minutes.
W. Michael Cox, chief economist of the Federal Reserve Bank of Dallas who compiled the study, says using the required number of hours of work as a bench mark is by far the best way to measure trends in Americans’ living standards.
“In appraising the nation’s cost of living, it’s what the average American can afford that matters,” Cox says. At the same time, he points out, prices of new products such as computers decline so rapidly that ordinary Americans can soon buy what only the rich once could afford.
The wage levels that Cox has used in his calculations are from the Labor Department’s average hourly wage for rank-and-file production workers. In 1950, that figure stood about $1.44 an hour. Last year it hit a record $13.18 - not including fringe benefits.
Moreover, the figures don’t take account of tremendous quality improvements that have been made over the last few years in everything from calculators to cars.
New homes are more likely to come with central heat and air-conditioning, housewide insulation and storm windows, major kitchen appliances, a garage, extra bedrooms and bathrooms and many other amenities.
Today’s refrigerators are much more sophisticated than those of the 1950s.
And automobiles, a major purchase for most American families, are vastly better today than they were even a few years ago - more fuel efficient, less likely to need heavy repairs, longer lasting and more comfortable. Tires, too, are safer and last longer.
Even the basic coast-to-coast or long-distance telephone call is sharply improved over what it was in the 1950s. With rare exceptions, you can dial directly and get through any time of day or night. The sound is clear. And the price of each call has dropped sharply.
Cox points out that with relative costs so much lower now, basic living costs are sapping far less than they used to from Americans’ paychecks. In 1950, for example, the average American family spent 54.8 percent of its income on food, shelter and clothes. Today, it’s 37.7 percent.
That, in turn, enables Americans to spend more of their money on recreation and leisure, and those costs are going down as well.
Not everything costs less than it used to - even on Cox’s amount-of-work-needed scale. Financing college tuition and medical expenses both require far more of a worker’s time than they did a generation ago. So do movies.
But, thanks partly to technology, medical care is far better than it was in the 1950s, and although educational quality is subject to debate, workers with bachelor’s degrees still earn an average $19,060 a year more than high school graduates - up from a comparable $12,171 in 1958.
Cox is optimistic about the future. Although prices of ordinary consumer goods probably will not decline sharply in coming years, he says, new products - such as computers - will, and Americans’ incomes will continue to grow. The good old days, he says, are still to come.